Buyer Agents - Make certain you "go the distance" for your Client!

The Fifth District Court of Appeals of Ohio sitting in Delaware CountyRecently decided a case dealing with an alleged acreage shortage andAddressed the duties of the seller and the real estate agents involved inThat transaction. (See Schmiedebusch v. Rako Realty, Inc., 2005-Ohio-4884.)The case is insightful, as it illustrates the relatively minimal duties owedBy a seller and seller's agent to a buyer, yet the extremely high dutiesOwed by a buyer's agent to a buyer.

Schmiedebusch dealt with a situation in which the buyer purchased a vacantLot in Delaware County on which he planned to build a home. After the buyerFound the lot through an Internet search, he had his real estate agentContact the seller's agent. The seller's agent then faxed the plat and gradePlan for the property and surrounding area to the buyer's agent. The buyerClaimed that he followed his agent and the seller as they "walked off" theBoundaries of the property during a physical inspection of the lot. At theClosing, the buyer received a deed and signed a mortgage--both of whichContained an accurate legal description for the property.

After the closing, the buyer claimed that he did not receive as much land asHe thought he had purchased. The land he claimed he thought he wasPurchasing actually encompassed two lots, but he only purchased one lot. HeAlleged that the "For Sale" sign was placed on the property in a way thatLed him to believe that both lots were one lot. He asserted that the sellerAnd real estate agents involved intentionally misrepresented information toHim because any home built on the lot that he purchased would have to beBuilt behind another house. He then brought suit against the seller,Seller's' agent and his agent for fraudulent and negligent misrepresentation.He also brought a claim against his agent for breach of fiduciary duty.

The trial judge dismissed all of the claims against all of the defendants.However, the buyer appealed that decision to the Court of Appeals. The CourtOf Appeals agreed with the dismissal of the claims against the seller andThe seller's agent, but the Court of Appeals allowed the claims of breach ofFiduciary duty and negligent misrepresentation to proceed against theBuyer's' agent.

The Court first addressed the claims against the seller and seller's agent.The Court of Appeals applied the doctrine of caveat emptor and found thatThe buyer could not have justifiably relied on any representations of theSeller or the seller's agent. The court noted that caveat emptor precludesRecovery by a purchaser against a seller if: "(1) the defect or condition isOpen to observation or discoverable on reasonable inspection; (2) thePurchaser had unimpeded opportunity to examine the property; and (3) theSeller did not engage in affirmative misrepresentation or concealment soReprehensible in nature as to constitute fraud."

The Court observed that the plat provided accurate information about theLot, as did the information contained in the MLS listing. Moreover, theRelevant closing documents also contained an accurate legal description.Thus, the Court found that the seller and seller's agent owed no additionalDuties to the buyer in this situation.

The Court's view of the buyer's claims against his agent was much different.The Court assessed the fraudulent misrepresentation claim against theBuyer's' agent and found that the buyer was unable to establish that aFraudulent mis-representation was made by the buyer's agent. However, theCourt then closely analyzed the extremely high fiduciary duties owed by aBuyer's' agent to a buyer. Significantly, the Court agreed with the buyer'sArgument that the buyer's agent "should have known the true dimensions ofThe property involved" based upon "the increased standard of competencyRequired of a real estate agent."

The buyer's agent asserted the doctrine of caveat emptor as one of hisDefenses. The Court shrugged off that defense, indicating that it, "does notApply when a real estate agent fails to disclose to his clients facts whichWere known or should have been known by him that were material to theTransaction."

The Fifth District Court of Appeals issued a very pro-real estate agentDecision several years ago, in which it determined that only one provisionOf Ohio's agency law provides a private right of action against a realEstate agent. (See Roth v. Yonts, 1999 WL 668586.) Therefore, the Roth CourtConcluded that no private right of action exists based upon the otherProvisions of Ohio's agency law. Nevertheless, in the Schmiedebusch case,The Court of Appeals closely analyzed the various statutory duties set forthIn Ohio's agency law and found that the buyer was entitled to pursue hisBreach of fiduciary duty claim against his agent.

Similarly, the Schmiedebusch Court found that the buyer only needed to showThat false information was provided to him and that his agent failed toExercise reasonable care or competence in obtaining or conveying thatinformation, in order to pursue a claim for negligent misrepresentationagainst his agent. The Court of Appeals implied that it was relativelysimple for a buyer to pursue a negligent representation claim against abuyer's agent, since a buyer's agent owes such a high standard of care to abuyer. Thus, the Court of Appeals also allowed the buyer to continue topursue his negligent misrepresentation claim against his agent.

The Court of Appeals did not decide whether any duty was actually breachedin this case. The Court merely found that the dismissal of claims againstthe buyer's agent was improper. Most importantly, the Court of Appealsemphasized the extremely high duties owed by a real estate agent to theclient and indicated that when any such duty may have been breached, a trialwould have to be held to determine whether any duty was in fact breached.

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